Pharmaceutical distribution network

Abstract

This chapter describes the tactical organisation of a distribution network of pharmaceutical products. It focuses on the optimal selection of transportation modes, i.e. the size and frequency of shipments, from a central storage location to all markets inside Europe. Tactical organisation means that the objective is to determine the characteristics of the shipments, to serve as a basis for contract negotiations with the intended carriers. The problem is modelled as a mixed-integer linear program, and solved accordingly. Then simulation is used to check the robustness of the optimal results. The results indicate a potential reduction of total transportation costs of 36%. Simulation indicates a deviation of only 4%. Its main characteristics are a reduced shipping frequency for small customers, indicating that marketing will have to be involved in the practical implementation. Additional strategic options, regarding adding distribution centres (DCs), were also investigated with the same model. © 2009 Springer London.